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Speaker 1: Let's talk about private hospitals because they're on the verge

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Speaker 1: of collapse according to news reports, with a lot of

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Speaker 1: public patients waiting for more than a year for surgery,

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Speaker 1: and the overstretched hospital system is seeing an influx of

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Speaker 1: private patients as a result of hospitals gone here in

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Speaker 1: South Australia, for instance, over the last three years three

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Speaker 1: to four, Victor Harbor Private Hospital it's closed, Keith and

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Speaker 1: District's Hospital gone. McLaren Vale District Hospital also gone, as

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Speaker 1: has South Terrace Urology Day Surgery, Westlake's Day Surgery, Fullerton

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Speaker 1: Private Hospital is closed, Parkwind Private Hospital, Oxford Day Surgery,

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Speaker 1: Home Nurses Infusion Center, North Adelaide gastro Enterology Center, Northern

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Speaker 1: York Private Hospital and Mount Gambia Private Hospital. So that's

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Speaker 1: concerning CEE Australia Private Hospitals Association Michael Roff on the line, Michael,

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Speaker 1: good morning for your.

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Speaker 2: Time, Morning Matching.

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Speaker 1: It is I worry, isn't it. We're losing private hospitals

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Speaker 1: at a time when the public system has been under

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Speaker 1: so much pressure for as long as it has.

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Speaker 2: Absolutely I think these have been described as the most

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Speaker 2: challenging set of financial conditions that the private hospital sector

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Speaker 2: has faced in living memory, and the reason behind it

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Speaker 2: is a long term disconnect between the amount that health

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Speaker 2: insurance companies pay private hospitals to treat their members and

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Speaker 2: the cost increases being experienced by those hospitals to provide

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Speaker 2: high quality services. So if you're being paid less than

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Speaker 2: the actual cost of providing those services, it makes it

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Speaker 2: very difficult to keep operating on a financially viable basis now.

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Speaker 1: Indeed, so what's the answer, I mean, do we need

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Speaker 1: a higher Medicare levy? Is that part of it?

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Speaker 2: Well, look, I think there's a couple of things here,

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Speaker 2: and the federal Health Department has been instructed by a

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Speaker 2: Minister Butler to have a very close look at what's

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Speaker 2: happening across the sector. So they're looking at all the

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Speaker 2: financial arrangements, they're looking at all the policy settings that

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Speaker 2: the federal government's responsible for. But the key thing is

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Speaker 2: the health insurers are not meeting the costs of care,

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Speaker 2: but they do have the capacity to do so without

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Speaker 2: the need for further premium increases. If you look at

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Speaker 2: what happened at the end of last financial year, the

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Speaker 2: health insurance industry had a collective profit of two billion dollars.

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Speaker 2: The year before that it was one billion dollars. And

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Speaker 2: from the announcement of the health insurers that are listed

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Speaker 2: on the Stock Exchange with their half year results so

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Speaker 2: far this year, there's probably going to be between two

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Speaker 2: and a half and three billion dollars profit. So they

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Speaker 2: have the capacity to pay more to private hospitals without

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Speaker 2: bumping up premiums for.

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Speaker 1: Their yes, and we all know where that profit is

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Speaker 1: coming from. Of course, we feel that everyone who's got

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Speaker 1: private health knows all about that.

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Speaker 2: Absolutely, but there are real issues for the broader health

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Speaker 2: system here because you know, private hospitals currently treat around

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Speaker 2: five million patients every year. For of all hospital admissions

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Speaker 2: go through private hospitals. So if we have fewer and

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Speaker 2: fewer hospitals able to keep their doors open, that means

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Speaker 2: that there is more burden thrown onto the public hospital system,

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Speaker 2: and we've seen that they clearly can't cope with the

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Speaker 2: patient load they have at the moment. We've seen waiting

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Speaker 2: this around the country continue to grow.

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Speaker 1: Yeah, indeed, So part of it then is making sure

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Speaker 1: that money is spread not just in profit but throughout

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Speaker 1: the system.

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Speaker 2: As you say, absolutely absolutely, there is the money within

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Speaker 2: the system to make it more viable. It's just whether

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Speaker 2: the health insurers want to hold on to their own

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Speaker 2: profit or they want to make sure that you know,

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Speaker 2: there are hospitals for their members to go to. And

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Speaker 2: if you take this to its logical conclusion, you know

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Speaker 2: it's totally undermining the value proposition of private health insurance,

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Speaker 2: which is that you can get access to care with

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Speaker 2: your doctor of choice in a hospital that's convenient to

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Speaker 2: you without waiting. Well, the fewer private hospitals there are,

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Speaker 2: the less that proposition stacks up.

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Speaker 1: What about staff in private hospitals, specialists, other people that

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Speaker 1: need to work in there. You're able to get the staff,

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Speaker 1: particularly the specialists that private hospitals have traditionally attracted.

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Speaker 2: Yeah, look, there's not a problem with the number of specialists,

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Speaker 2: but what we've found since COVID is that they are

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Speaker 2: changing their working practices. So we engage some consultants to

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Speaker 2: do a financial analysis of the sector late last year.

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Speaker 2: So they looked at all of the audited financial statements,

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Speaker 2: but they also interviewed the hospital chief executives around the

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Speaker 2: country and one of the key messages coming back was

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Speaker 2: in relation to specialists, forty two weeks is the new

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Speaker 2: forty six, so they are taking more time off. And

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Speaker 2: it used to be that you could fairly well predict

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Speaker 2: when specialists were not going to be available. Now it's

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Speaker 2: happening at the drop of a hat, which makes it

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Speaker 2: much harder to manage the workflow through operating theaters, and

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Speaker 2: also to manage the staff requirements you need in terms

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Speaker 2: of nursing and other clinical staff and other support staff.

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Speaker 2: So it has become much more difficult to operate private

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Speaker 2: hospitals because of the change in workforce behavior.

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Speaker 1: It's not a good outlook, is it, though? At the moment,

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Speaker 1: as he said at the start, Michael, I think the

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Speaker 1: hospital system is certainly struggling, both private and public, and

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Speaker 1: unless some drastic change comes in the future, does not

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Speaker 1: look overly rosy.

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Speaker 2: No, And I think another thing that needs to happen

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Speaker 2: is a review of the way that private health insurance

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Speaker 2: premiums are set, because we know they have this annual

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Speaker 2: application process and the health Minister announces what the average

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Speaker 2: premium increase will be, and then people's experience is often

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Speaker 2: quite different depending on which fund they're with, or which

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Speaker 2: product they have, or which state they're in, and people

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Speaker 2: think for example, Oh, if health insurers are getting a

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Speaker 2: three percent increase or a four percent increase, then that's

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Speaker 2: all flowing through to the providers of care, and that's

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Speaker 2: just not the case. Typically, the increases in benefits paid

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Speaker 2: to private hospitals are several percentage points below the premium

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Speaker 2: increase granted to health insurance companies, So there needs to

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Speaker 2: be a mechanism to make or that those premiums actually

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Speaker 2: flow through to the providers.

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Speaker 1: Indeed, future of maternity services in private hospitals, is there

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Speaker 1: a future for maternity in the next decade.

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Speaker 2: Well, look at that. It's certainly becoming much harder and

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Speaker 2: there's a whole range of reasons behind that, from different

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Speaker 2: models of care, to costs of indemnity, insurance, availability of

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Speaker 2: specialist midwives. So all of those factors are feeding into

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Speaker 2: making it increasingly difficult. And this is you know, one

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Speaker 2: of the services that we're starting to see close. So

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Speaker 2: what a hospital will do typically is, if it's, you know,

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Speaker 2: in financial difficulty, it will look across the range of

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Speaker 2: different services it provides and work out which ones are

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Speaker 2: making money and which ones aren't. And you know, the

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Speaker 2: logical response is if you don't want to the hospital.

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Speaker 2: You concentrate on the services that are making money, and

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Speaker 2: at the moment it's very difficult, particularly in regional areas,

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Speaker 2: to keep private maternity services open.

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Speaker 1: Yeah, yeah, I think that's certainly right, Michael, some challenges ahead.

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Speaker 1: Thank you for your time this morning.

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Speaker 2: Thank you very much, Matthew Michael rough

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Speaker 1: CEO Private Hospitals Association